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Appraisal Waivers & Increased Debt Ratios - For Conventional Loans

In recent months, we have continued to see the evolution of lending standards on Conventional loans, in a good way.
 
The days of no income verification loans and other various programs that existed a decade ago, will not soon return. However, we are seeing easing of certain lending standards.
 
This includes new calculations for student loan payments, expanded low down payment home loan options and the two items this article will address: increased debt ratios and appraisal waivers.
 
Increased Debt Ratios
For a number of years, Fannie Mae’s maximum debt to income ratio was 45%, but that number is now 50%.
           
The debt to income ratio is a ratio of your monthly pre-tax income to monthly debts that appear on your credit report (mortgage, student loans, credit card, auto payments, etc.).
 
This change allows someone with a $48,000 annual salary or $4,000 per month in pre-tax income, to qualify with monthly debts (including their mortgage payment), up to $2,000. The previous guidance would have only allowed this person to qualify with payments up to $1,800. That extra $200 per month, may not seem like a lot, but on a 30-year fixed loan at 4%, that would equate an additional $42,000 that could be borrowed.
           
Appraisal ... more

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